Continuing Resolution and Sequestration Communication Points for Commanding Officers 
From Navy Office of Information  
WASHINGTON -- The Navy Office of Information released communication points Feb. 7 for commanding officers to use to augment their own ongoing internal communication efforts for continuing resolution and sequestration issue.

With the budgetary uncertainty associated with the ongoing continuing resolution and the looming threat of sequestration, the Navy must begin seriously considering options to deal with what could be a $4-$9 billion shortfall in operating and maintenance accounts. It is exceedingly important that Navy leaders do all they can to ensure their people are as well informed about what it all means to them.

The Navy Office of Information released the following communication points:

"Like many Americans, you and your families are undoubtedly experiencing anxiety as a result of the fiscal uncertainty that exists in the country today. I am sure that you have seen the news recently about the many decisions the Navy has had to make to adjust to significant shortfalls in our accounts.

Allow me a few moments to try to put some of that into context for you and to explain what we are doing to prepare for the consequences of having to operate without a spending bill this year, as well as the looming threat of sequestration.

Let me first address the spending bill. Without an appropriations bill for this year, our Navy is funded under a continuing resolution (CR) that Congress passed back in October. It's set to expire in late March, but it could go much longer. We are planning for the potential that it could last the rest of the fiscal year.

Living under a long-term CR is a big problem for us.

First, it's based on last year's spending levels that do not fully cover the programs and priorities we submitted to Congress this year. Specifically, the CR underfunds our operation and maintenance accounts (OMN) by $3.2 billion.

Second, we have experienced $1.4 billion of growth since last year's budget was enacted: unplanned but abnormal expenses for increased naval operations in the Middle East, increased fuel costs, as well as unexpected repairs to USS Miami (SSN 755), USS Porter (DDG 78), USS Montpelier (SSN 765), USS San Jacinto (CG 56), and USS Nimitz (CVN 68).

And third, the CR limits our flexibility to react because it does not allow us to transfer funds to OMN from other accounts, such as procurement and research, to cover these shortfalls.

In total, our OMN account will come up $4.6 billion short under a yearlong CR. This will impact funds for fuel, parts, ship and aircraft repairs, base operations, salaries for our government employees and contractors, and maintenance for buildings, roads and runways.

If we don't start slowing the "burn rate" of those dollars now, we will not have enough funds to operate the Navy through the end of the year. So, with a focus on preserving first and foremost the readiness of our forward-deployed forces, we are:

* Preparing to cancel all surface ship maintenance availabilities scheduled at private shipyards from April to September. This will affect 30 of our 187 surface ships. These maintenance periods cannot be replaced once cancelled, causing the condition of these ships to degrade.

* Preparing to cancel all aircraft depot maintenance from April to September, affecting up to 327 aircraft and rendering them unavailable for use.

* Cutting spending by about half on base operating support. We may even cancel repair and modernization of nearly all piers, runways, buildings and other facilities through September 2013.

* Freezing the hiring of civilians and terminating temporary employees not supporting OEF mission-critical capabilities. This will reduce our shipyard workforce by more than 3,000 - almost 10 percent of the workforce.

* Reducing overhead costs by cutting IT support, cancelling conferences, and severely limiting travel. We're even going to cut 30 facilities demolition programs, which would have provided another $62 million in contracted support and labor.

As you may have heard, we even asked the Defense Department for permission to remain at the current carrier presence level in the Central Command region. In other words, we will not be trying to maintain more than one carrier there at any given time. This allowed us to delay the departure of the USS Harry S. Truman (CVN 75) and the cruiser USS Gettysburg (CG 64).

None of these decisions were easy to make, but I'm sure you can understand why leadership needed to make them. We simply must find a way to live within our spending limits if we want to have enough money to make it through the year, given the heavy demand overseas for naval forces. Again, the focus is squarely on preserving the readiness of our forward-deployed forces.

We will continue these measures - and we may have to execute others, like reducing underway training for ships and aircraft not deployed - until a spending bill is passed or we receive authority to move money to the OMN account.

It's the prudent thing to do, but we know it comes at a cost. These cuts will affect our long-term readiness, as well as the economies of the communities that help support and maintain our naval forces. The Secretary and the CNO have been very public about the specific costs to local communities and shipyards all over the country, and my expectation is that they will continue to make people aware of the very real implications to our Navy and to the people who support us.

Now, if sequestration happens, it's a whole different ballgame. We would then face an additional $4 billion-$5 billion cut for this year alone, further reducing training and readiness. And because sequestration would be triggered in March - nearly half-way through the fiscal year - the Navy must absorb the additional cut in only a few months, requiring even more severe reductions to the operating account.

We've only recently been given permission to plan for sequestration, but our early forecasts show that it would be virtually impossible for us to deploy follow-on forces on anything resembling a predictable schedule. Without permission to move money from other accounts to OMN, we would be forced to:

* Stop all deployments to the Caribbean and South America, thereby cancelling all regional exercises.

* Limit European deployments to only those supporting ballistic missile defense missions.

* Cut the number of ships and aircraft deployed to the Pacific by half ... and cut by 25 percent days at sea and flying hours for all Pacific forces.

* Stop stateside training and other operations for ships and aircraft preparing to deploy.

What does this mean from a practical perspective?

It means our aviators, their aircrews, our surface Sailors and submariners will not be properly qualified in advanced warfare techniques. Training essentially stops. We anticipate that the delay to Harry S. Truman's deployment and the reduced presence in the Gulf may buy back some of the training that would have otherwise been lost, but we don't know exactly what that is yet.

For those units that do have to cease training, it also means that, once training could resume, it would take us up to 12 months to deploy naval forces again.

In short, it means most of the fleet will not be ready to go anywhere by 2014.

As I said, one way to avoid this level of unpreparedness is to get Congressional approval to move unspent money from other accounts. But even that provides only temporary relief.

If we move money from investment accounts - like ship and aircraft construction - into OMN, we will be forced to buy fewer ships, aircraft and weapons. That will likely have a dramatic affect on things like LCS and the Joint Strike Fighter. And breaking or renegotiating existing contracts will undoubtedly cause layoffs and severely injure an already fragile industrial base.

Either choice - dramatically reducing OMN spending or moving unspent investment account money - results only in a short-term gain and mortgages our future.

And we might as well forget any sort of certainty when trying to plan for either the FY-14 or FY-15 budgets. There will simply be no reliable basis upon which to plan, no certitude of funding upon which to allocate resources.

The threat of an extended period of CR, plus the cuts required by sequestration, would fundamentally alter the Navy's ability to fight, train, and maintain our ships, aircraft, and other critical equipment. It makes us less able, if not incapable, in the near-term of doing that which the nation expects of us. And in the long run, this "perfect storm" may affect our ability to retain the very talent we will need to function in an increasingly austere fiscal environment.

One thing is certain, however. Your pay and benefits will remain intact. You may have seen a recent decision by Secretary Panetta to limit your pay raise next year at one percent, but it is still a pay raise. And we have been getting pay raises each year for more than 10 years. And even with all this budget churn, that is the only impact to your compensation package.

For our civilian employees, I will tell you that, yes, the Department of Defense is considering furloughs. But there have been no final decisions in that regard, and the Navy will follow whatever guidance it receives. Early indications are that, should they be approved, furloughs would take affect between April and October and result in a 20 percent cut in your pay.

Again, we know this uncertainty is difficult. But we are committed to keeping you informed and to trying to preserve your readiness as much as possible. We will do our best to ensure that you are updated regularly with the latest information and forecasted impacts. Thank you.
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